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CUs at pivotal tipping point Reality Check attendees told

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ATLANTIC CITY, N.J. (3/2/12)--Credit unions are at a pivotal tipping point in terms of competition, attendees at the New Jersey Credit Union League's Reality Check conference in Atlantic City were told Wednesday.

John Lass, CUNA Mutual Group senior vice president of strategy and business development, made predictions for credit unions for the next four years during the New Jersey Credit Union League's Reality Check conference in Atlantic City. (Photo provided by the New Jersey Credit Union League)
John Lass, senior vice president of strategy and business development at CUNA Mutual Group , noted that four years ago, credit unions faced a very different type of competitor in the industry than they do now.  PayPal, Target and WalMart are getting into the financial services industry. He dubbed them true game changers. (The Daily Exchange March 1).

He cautioned credit unions to watch out for developments in mobile payments and told them that the key organization to watch is Isis, which offers a "mobile wallet" that organizes payment cards, offers, and loyalty cards in one app on a smartphone. With JP Morgan Chase and Capital One already signed onto the Isis network, "credit unions need to get a seat at that table," Lass said.

Among the examples he cited: Japan's largest mobile phone provider, which gained a bank charter to allow its customers to bank over their phones and gained unprecedented market share, and  digitized USAA, which consistently is ranked at the top in customer satisfaction, even though it is complete self-service based.

Falling behind as the financial services industry becomes digitized isn't the only challenge credit unions face, Lass said. He pointed out a trend of traditional spread income becoming "compressed."  "Income comes from fees or spreads--that is pretty much it," he told attendees.

When asked what they think of the future of the traditional spread income will be in the next five years, 34% of attendees said it will widen, while 65% said it will continue to compress. After providing this "reality check," Lass presented some peace of mind. "Branches are here to stay," he said. "But credit unions need to find a way to sell away from the branch."

At other Reality Check sessions, credit unions heard this advice:

  • Technology and social and economic mobility is a top priority for the Millennial Generation--the 50 million Americans born between 1981 and 2000--and those should be the top priorities for credit unions that want to attract this generation, said Kenneth O'Connor, director  of student advocacy for Fynanz, a private student loan company and CUNA Strategic Services provider.
  • Credit unions need to access the "credit union landscape"--strengths, weaknesses, threats and opportunities--to make their business model sustainable, said Anne Legg, vice president of marketing at Cabrillo CU, San Diego. Legg introduced the Shared Value Business Model, which provides economic value to the industry through additional income generated from peer secured loans needed to manage expenses.
  • New trends are reshaping the world of financial services, said Mark Sievewright, president of Fiserv's Credit Union Solutions. He presented technology trends credit unions must embrace to stay current and viable, noting that  credit unions must keep up with the digital movement and open themselves up to the world of "mobile." Debit cards and online bill pay are must-haves to attract and retain younger members.  "Mobile" is a revenue opportunity for financial institutions, he said.
  • To prevent identity theft, consumers must "think like a spy," said identity theft victim John Sileo. "We're leaving digital DNA all over the place," he said, emphasizing the need to take responsibility for managing, controlling and protecting data.

Senator sends kudos to CU on account disclosures

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CHAMPAIGN, Ill. (3/2/12)--The University of Illinois Employees CU  (UIECU) received a letter praising its simple and transparent checking fee disclosures from U.S. Sen. Richard J. Durbin (D-Ill.)

Durbin is known as a critic of banking fees and was author of the amendment in the Dodd-Frank Act that requires the Federal Reserve to limit interchange fees on debit cards.

In the letter, written Feb. 28, Durbin commended the $255 million asset, Champaign, Ill.-based credit union "for providing your customers with a concise and consumer-friendly disclosure form listing the fees and key terms associated with your checking accounts.

"By making comprehensive fee information available in a simple, easy-to-read  format developed by the Pew Charitable Trusts, you have chosen to be upfront and honest with your customers about the fees you charge," said the letter.

Durbin said it was his understanding that UIECU "is the nation's first small credit union, as well as the nation's first university-affiliated credit union, to adopt the form"  and that the credit union was leading the way "in providing transparency for student checking accounts."

"Your decision to adopt this disclosure form at your four local branches and on your website will benefit your student and community member customers, and it will help advance the cause of fee transparency to the benefit of consumers nationwide," Durbin said.

UIECU uses the disclosure forms for six types of checking accounts, according to the credit union's website. "We think banking should be simple, that's why we've made our disclosures easy to read with no hidden fees or charges. Banking, simplified," says the site.

Use the link to review the disclosures for the credit union's Share Checking, Campus Checking, Illini Advantage Checking, Illini Advantage PLUS Checking, Eco-Checking and Fresh Start Checking.

UICCU in Iowa Fraud write-offs drop 16 in 2011

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IOWA CITY, Iowa (3/2/12)--Credit card fraud write-offs decreased more than 16% in 2011 at $1.4 billion-asset University of Iowa Community CU (UICCU).

UICCU also reduced gross fraud per case by 27% in 2011 when compared to 2010 and reduced fraud write-offs per case by 41%.

The drop in fraud write-offs was the result of changes made to the credit union's fraud strategies over three years, according to a joint release from UICCU and The Members Group (TMG), Des Moines.

Changes included adjustments to ZIP code, travel, country code and compromised account strategies.

TMG created a customized ZIP code strategy for UICCU that calculates the number of miles between a retailer and the cardholder's home address, allowing the credit union to halt a transaction in real time if the transaction is too far away from home and the merchant falls into a high-risk category.

The credit union also customized its strategy for members who travel. Instead of removing all blocks from the traveling member's account, the new approach routes red-flag transactions to an in-house work center for review by a fraud analyst.

When a member travels to a country whose code is blocked to prevent fraud, UICCU asks TMG to lift the block, but only for the shortest time period possible.

Instead of adding compromised accounts to Visa and MasterCard warning bulletins, which prevents cardholders from using their cards, UICCU reissues new plastic cards. This allows the account to remain open for several days to eliminate the gap in service to the member.

A UICCU spokesman said the slight additional risk created by omitting the cards from the warning bulletin is outweighed by cost savings and uninterrupted service to members.

PCUA Better Choice saves consumers 18M since launch

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HARRISBURG, Pa. (3/2/12)--Borrowers in Pennsylvania have saved more than $18 million since 2006 by using Credit Union Better Choice loans instead of typical payday lending products.

According to the Pennsylvania Credit Union Association (PCUA), 79 participating credit unions statewide issued 53,714 loans totaling almost $26 million dollars since the program was launched.

The Credit Union Better Choice program provides a payday lending alternative by allowing participating credit unions to loan up to $500 to borrowers for 90 days, PCUA said in a release.

In 2011, participating credit unions made 10,829 loans totaling $5.23 million. During the final six months of 2011, credit unions made 5,098 loans totaling $2.3 million, while borrowers deposited more than $230,000 in savings accounts linked to the program.

A $500 Better Choice loan costs $42.50 for a 90-day period and encourages savings by requiring consumers to deposit $50 in a savings account by the end of the loan period. Borrowers also receive financial education to help them make better financial decisions.

In comparison, a typical $500 payday loan costs $15 for every $100 borrowed for two weeks, which adds up to $450 over 90 days. That means consumers save an average of 80 cents in loan fees and costs for every dollar borrowed through a Better Choice loan instead of a payday lender, said PCUA.

Better Choice loans were developed by the PCUA, the Pennsylvania Treasury Department and the Pennsylvania Department of Banking.

CU safetysoundness heads Feb. Top 10 iNews Nowi stories

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MADISON, Wis. (3/2/12)--An article about how credit unions surpassed banks in consumers' perceptions of safety and soundness was the most-read News Now story in February.

The top 10 stories for the month were:

10. Mass. CU considers conversion to mutual co-op bank

WASHINGTON (2/17/12)--In Brockton, Mass., the directors of HarborOne CU posted an announcement to its website yesterday informing members that the credit union is considering a charter conversion from state credit union to a Massachusetts-chartered mutual co-operative bank.

9. IRS issues 'tax exempt' correction to CUs

WASHINGTON (2/8/12)--The U.S. Internal Revenue Service (IRS) sent a letter of correction to credit unions that were erroneously informed that they lost their tax-exempt status due to a filing error by the credit unions'  "central organization."

8. ATM disclosure changes needed, says CUNA joint letter

WASHINGTON (2/9/12)--The Credit Union National Association (CUNA) has joined with the Electronic Funds Transfer Association (EFTA) and other groups to urge members of the U.S. Congress to eliminate an unneeded ATM fee disclosure requirement "that has encouraged a large and growing number of frivolous lawsuits across the nation."

7. King and Sherman introduce CU capital bill

WASHINGTON (2/9/12)--In a bill CUNA says will enhance the safety and soundness of the credit union system, Reps. Peter King (R-N.Y.) and Brad Sherman (D-Calif.) have proposed to permit the National Credit Union Administration (NCUA) to allow credit unions to accept additional forms of capital, provided it does not alter the cooperative ownership structure of credit unions.

6. Banking chair wants CU, bank exam practices audit

WASHINGTON (2/14/12)-- Senate Banking Committee Chairman Tim Johnson (D-S.D.) sent a letter to the inspectors general (IGs) of the NCUA, two federal banking agencies and the U.S. Treasury Department seeking an audit of the examination  practices of the federal financial institution regulators.

5. New customer rankings: CUs only FI rated excellent

WABAN, Mass. (2/24/12)--Credit unions were the only financial institutions to receive "excellent" ratings in the Temkin Experience Ratings, which ranks the customer service across 18 industries. Credit unions ranked third across all industries.

4. CU employees discover body in repossessed truck

EVANSVILLE, Ind. (2/22/12)--Employees at a credit union in Evansville, Ind., got a shock Thursday when they opened a repossessed truck's hardshell cover and found the body of the truck's owner.

3. CUs back burgeoning growth in food co-ops

MADISON, Wis. (2/22/12)--Several credit unions have put the idea of cooperatives helping other cooperatives into direct action by helping finance start-up food cooperatives--reportedly one of the fastest-growing cooperative sectors in the U.S.

2. Debit cards: Use caution during some transactions

NORTH PALM BEACH, Fla. (2/7/12)--Your debit card looks like a credit card and feels like a credit card, so it must work exactly like a credit card, right?

1. Survey shows continuing growth in CU reputation

WASHINGTON (2/23/12)--Credit unions outshone banks in consumers' perceptions of safety and soundness with 40% of respondents to a recent poll saying they believe credit unions are the safest financial institutions, compared to 34% naming banks. Nineteen percent of respondents said they trusted both types of institutions equally.

New study Smartphones surpass basic cell phones

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MADISON, Wis. (3/2/12)--Nearly half of all adult U.S citizens own smartphones--outnumbering  those who own more basic cell phones, according to a new study from the Pew Internet & American Life Project. Credit unions should take note because consumers are increasingly using Smartphones for their mobile banking needs.

The study indicated that 46% of American adults were smartphone owners as of February--an increase of 11 percentage points over the 35% of Americans who owned a smartphone last May. Two in five adults (41%) own a cell phone that is not a smartphone, meaning that smartphone owners are now more prevalent within the overall population than owners of more basic mobile phones.

Nearly every major demographic group saw a notable gain in smartphone adoption during the past year, the study said. Those groups include men and women, younger and middle-aged adults, urban and rural residents, and the wealthy and the less well-off.

Overall adoption levels are at 60% or more within several groups, such as those with an annual household income of $75,000 or more, 18-35 year olds and college graduates.

Despite the relatively widespread overall increase in smartphone ownership, several groups saw modest or non-existent growth in the last year--primarily seniors, with 13% of those ages 65 and older now owning a smartphone.

The report is based on telephone interviews conducted by Princeton Survey Research Associates International from Jan. 20 to Feb. 19, among a sample of 2,253 adults, age 18 and older.

To read the full report, use the link.

CU System briefs (03/01/2012)

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  • TUCSON, Ariz. (3/2/12)--Hughes FCU was named the Indirect Lender of the Year for 2011 by the Mountain West Credit Union Association, which serves credit unions in Arizona, Colorado and Wyoming. Hughes FCU made 8,063 auto loans totaling more than $173 million through indirect lending in 2011, which represents a 345% increase when compared to 2010. During that period, the credit union increased its membership by 14%, with indirect lending accounting for just under 8% of growth. This is the second time that Tucson, Ariz.-based Hughes FCU has received the Indirect Lending of the Year Award …
  • SALEM, Ore. (3/2/12)--Maps CU has created the Maps Community Foundation to coordinate its community service activities (Statesman Journal Feb. 29). The foundation is a charitable organization that will emphasize financial education and asset-building initiatives. The foundation's first activity will be recruiting applicants for $10,500 in scholarships that will be granted this year to college-bound students. The Salem, Ore.-based Maps CU, which has $401 million in assets, has contributed more than $135,000 to Credit Unions for Kids and more than $58,000 in scholarships since it began tracking its giving …
  • FORT KENT, Maine (3/2/12)--Acadia FCU representatives will work side-by-side with students majoring in education at the University of Maine at Fort Kent (UMFK) to present the "Benny Banks" program in local classrooms. The pilot program for students of all ages received a $12,000 grant from the National Credit Union Foundation to coordinate events, develop resource materials and create financial literacy kits (Maine CU League's News and Views, March). From left, Acadia FCU Vice President Luis Sanclemente, UMFK Dean of Community Education Scott Voisine, Acadia FCU President/CEO Dave Desjardins and George Bragdon, Americorps VISTA volunteer at UMFK, recently accepted the NCUF grant check for the joint venture between the university and the credit union, which launched in November 2011 (Photo provided by the Maine Credit Union League) …

IConsumer ReportsI guides readers to IaSmarterChoiceI

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MADISON, Wis. (3/2/12)--Consumers who are fed up with big banks and are looking to join a credit union should use, according to Consumer Reports.

The website was developed a year ago by the Credit Union National Association (CUNA) and state credit union leagues to provide information on credit unions to potential members and press professionals.

The publication noted a new study by J.D. Power and Associates found poor service and more and higher bank fees have led to more defections by customers of large, regional and mid-size banks.

"The majority of individuals switching banks are moving to credit unions and smaller banks," said Consumer Reports. "Many credit unions have expanded services to match what you'll find at a bank, and since credit unions are nonprofit, fees tend to be lower."

The article then directs readers to CUNA's consumer page, which offers aSmarterChoice's credit union locator tool.

To read the article, use the link.

Kinecta NuVision call off merger

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MANHATTAN BEACH, Calif., and HUNTINGTON BEACH, Calif. (3/2/12)--The boards of two California credit unions--Kinecta FCU and NuVision FCU--have mutually decided to terminate their merger agreement, saying it would take two additional years to process, they announced Thursday.

Roger Ballard will continue as joint CEO of both credit unions while Kinecta conducts a CEO search process and puts a transition plan in place.

Both credit unions are independently strong and well-capitalized, they said. At the outset, their boards had agreed to move forward with the merger only if it offered substantial benefits with minimal disruption to members and their business strategies and operations.

However, as the credit unions continued to assess the length of time required for merger review, approval and integration, they estimated it would take an additional two years to complete the merger given the economic environment. They concluded that continuing the merger process for that amount of time would be too disruptive to their business and members.

"Merging two large, diverse financial institutions is an incredibly complex and time-consuming process that places significant demands on resources and diverts staff focus away from core business operations," said Darryl Johnson, Kinecta board chair. "Given the length of time now anticipated to complete the merger, both credit unions decided that moving the merger forward at this point is not in the best interests of either credit union or our members."

"We still believe there are great synergies between our credit unions, and look forward to exploring strategic opportunities that benefit our members. We have tremendous respect for the NuVision organization, and know it has a great future ahead," Johnson said.

NuVision board Chair Robert Geraci noted that the two credit union boards had "made excellent progress in our integration planning work, but both agree that continuing the merger through this extended length of time isn't the right strategy for either credit union or our members. We firmly believe that taking a hard look at the prospect of a merger was a worthwhile, positive process for both credit unions, and we each came away with new best practices we've already begun implementing that will benefit our organizations into the future."

Both credit unions said they were off to a strong financial start in 2012.  NuVision members will continue to use Kinecta Financial & Insurance Services investment programs and Kinecta gift cards, which were introduced to the credit union last year. The credit unions also will continue to partner on joint community programs and other internal initiatives through 2012.

Huntington Beach-based NuVision has $1.2 billion in assets. Kinecta, based in Manhattan Beach, has $3.5 billion in assets.